PepsiCo Comes Under Fire after Political Moves

Beverage maker PepsiCo (PEP) recently discovered that these days, political lobbying could come with a few unexpected price tags beyond what the lobbyists charge.

The company is coming under fire from recent donations to the Texas arm of the Republican Party, and boycott calls have since emerged. While Pepsico comes under fire in Texas and among liberals, I maintain a bullish stance. There’s a lot more to Pepsi than its soda, and the company’s performance so far has been impressive.

Looking at PepsiCo’s share price over the last 12 months suggests a stock as effervescent as its main product. After a small dip from late January last year going into February, the basic word to describe PepsiCo was “up.” The price slipped from around $138 to around $125 in the space of a month, as February proved bad news for Pepsi.

However, the company recovered almost immediately, getting back to its January levels by the third week of March. After that, a long period of slow upward climbing kicked in. Despite a few dips along the way, for the most part, the company trended upward. It went from March’s $137 to $164 by Thanksgiving. A slightly sharper uptick followed a small dip. With the new year’s arrival, PepsiCo leveled off around $170.

The latest news isn’t all good for PepsiCo, however. Pepsi is one of the “top corporate donors” among politicians and political committees alike that kept Texas’ abortion ban in place. That’s prompting growing calls for a boycott. Reports noted that Pepsi passed the Texas Republican party $15,000. While Pepsi’s contribution was a fraction of the $80,000 donated by AT&T (T), it was still enough to draw ire and put “#BoycottPepsi” as the highest-trending topic on Twitter (TWTR).

Crack Open Shares of This Diversified Leader

It’s likely distressing to investors that a call to boycott a company’s major product is trending on Twitter. However, this is also likely less of a problem than most might think it is. It’s a problem, granted, especially if those who follow such issues stick to their guns. However, it might well incite the other side of the aisle to make up some of the slack. Such is the divisive nature of politics these days.

Moreover, PepsiCo has been working to enhance its product line still further. The connection to Yum Brands (YUM) is still quite active. Plus, Pepsi has been bringing out some of its own operations. A new deal with California staple Randy’s Donuts has produced a Pepsi-themed donut available since January 23.

Perhaps even better, Pepsi is likely to win back some of the boycotters thanks to a new deal between itself and plant-based meat producer Beyond Meat (BYND). The partnership, dubbed the “PLANeT Partnership,” started a year ago and is now ready to release a product.

Specifically, plant-based beef jerky.

It’s not the first such plant-based jerky alternative around—Conagra Brands (CAG) already has one, and there are smaller firms also in the market—but it will be a fairly major name nonetheless.

It’s hard for any product produced by both PepsiCo and Beyond Meat to be anything but. With Pepsi also working with Tesla (TSLA) on a greener delivery truck, the end result should be the Texas boycott having much less impact than it might have.

Just to round things out, PepsiCo’s dividend history also makes it clear a Republican-related boycott won’t have much impact. PepsiCo has reliably paid a dividend for years. It also increased that dividend steadily. That makes it an excellent choice for income stock hunters.

Wall Street’s Take

Turning to Wall Street, PepsiCo has a Moderate Buy consensus rating. That’s based on two Buys and three Holds assigned in the past three months. The average PepsiCo price target of $180.20 implies 6.1% upside potential.

Analyst price targets range from a low of $165 per share to a high of $195 per share.

Concluding Views

It’s never good news when your company ends up on a Twitter trending list for a boycott in the making. However, PepsiCo has demonstrated the best way to insulate against such issues: diversification. Those who might boycott PepsiCo for its political leanings may also retreat in the face of clean-energy delivery systems and plant-based meat snacks.

Granted, PepsiCo is trading near its average price target. Don’t forget the incredible run-up it had in the last year. However, there’s likely still room for more in PepsiCo’s gains. Even without huge gains in the share price, its reliable dividend is still a solid addition to an income portfolio. PepsiCo is stable and well-diversified, and that makes being bullish here a sound move.

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